Mike Townsend: This is an interview with NickBaum, the co-founder and CEO of Tremendous. Tremendous was started originallyin 2010, they went through Y Combinator as a gift card startup, we talked abouttheir journey to profitability, how they ended up buying out investors, andthen years later, Starting Tremendous to focus on customer company payouts.

Mike Townsend: So when companies needto payout employees or customers or people doing surveys, they use Tremendousto do that. This is a story of being laser focused and profitable as business.We talked about VC versus self-funded the pros and cons of doing that. And whathas made Nick and Tremendous successful so far so hope you enjoy some goodstartup lessons and hear Tremendous story. Here is Nick Baum.  

Mike Townsend: All right, Nick,excited to chat with you. I love what you're working on at Tremendous and yourstory shifting from the gift card space.

Mike Townsend: I'd love to just heara little bit about what you went through in regards to the transition or thepivot going through YC and what you guys are building now. Do you wanna justkind of fill me in on the context there and we can take it afterwards?  

Nick Baum: Yeah, sure. So we canstart at the top here. We. me a very two very good friends of mine. Wentthrough Y Combinator with a gift card idea. The idea being that gift cards.Aren't that great. They're, it's nice that you can express the sentiment.

Nick Baum: I thought of you. Ithought of this place, but really you're trapping money at one location. So wewanted to start a business where one. We we'd have a product where thatwouldn't happen. And two actually offered the ability for people to send giftswith the recommendation, for the recipient to go to virtually any restaurant ofthe senders choosing.

Nick Baum: And this was back in2010. So very few. Restaurants and small businesses actually had their giftcards listed online. So we thought this was a win-win where more exposure forsmall businesses. And for consumers, they get flexibility where their moneyisn't trapped at the business. And we did something that startups are notsupposed to do.

Nick Baum: We became profitablevery quickly. And what we learned was, although the product was. We thoughtwhat mattered was the user acquisition channels. We found a way to getcustomers, but there was a ceiling on it. And we didn't know how to grow thisbusiness in a way where it made sense to involve venture backing.

Nick Baum: So we ended up buyingout our investors, we doubled their money and actually put the business intomaintenance mode. And so we had one person basically operating the businessfull. And the founders did other things. One became a VC, one became anexecutive and Angelist, and I became involved in a few entrepreneurial things.

Nick Baum: And eventually I endedup coming back to GiftRocket because we saw this opportunity. We actually hadreal businesses. Using this consumer platform in ways that didn't make a wholelot of intuitive sense. So for example, we had Nike using GiftRocket to sendsurvey incentives. We had soul cycle using GiftRocket to give employeerecognition awards, and we thought, hell, if they're going to.

Nick Baum: GiftRocket for this,this consumer platform where really this was being used for birthdays, forweddings and given to friends and relatives. Like we can actually buildsomething that's good for business purposes. And to give you an analogy here,this was like, imagine you're, you're a business and you need some type of aword processors, create some type of document and you need that for your wholeorganization.

Nick Baum: And someone found Ms.Paint and decided that's what they were going to. For all of your wordprocessing in the organization. That's what it was like for these businesses tobe using GiftRocket, to be sending money for survey incentives, for marketingincentives, et cetera. So that's how we launched Tremendous.

Nick Baum: In 2018 GiftRocket wasfounded in 20 10, 10. So there was a shall we say a brief hiatus before we gotinto the B2B space, but that was the Genesis of it.  

Mike Townsend: And I'm so curious tolearn a little bit more about the story. So how, what scale were you guys atwhen you realized that this just can't get any bigger or isn't worth your time?

Mike Townsend: Like what, whatrevenue were you doing at that time?

Nick Baum: Yeah, I mean, I thinkwe were making, I don't know if we were at a million dollars per year, butwe're approaching that, but we were reliance upon SEO and we knew that thereweren't other keywords that we were gonna be able to eat, win. And we had triedpaid search and paid search was not working.

Nick Baum: Oh, we tried a lot ofthings. Going back to the early days, we, we tried a strategy of going door todoor, to businesses, trying to convince them to put links, to GiftRocket ontheir website, not a very scalable solution. But we tried virtually everythingfor this segment of the business. And we, we stayed away from corporate back inthe day.

Nick Baum: We thought, Hey. Ourbackgrounds are technical. One of my co-founders had been an early engineer atFacebook. The other one was also product and tech-minded and we thought wedon't want to do sales. That was really, you know, in retrospect, not a greatperspective to have. And if we could've been doing this starting in 2010, thatwould've been a lot, lot better.

Nick Baum: But we basicallythought, Hey, there's a limit here. We've tried all these different tactics togrow this consumer business. We didn't know what to do. We had toughconversations with investors and we decided that doubling their money was thebest approach that we could have, because really it didn't make much sense forthem to convert their debt into equity and get dividends for God knows how manyyears until they were made whole.

Mike Townsend: So were you guys happywith it? I mean, was it like 300 K checks or was that just your top linerevenue and then marginal costs were less than that?  

Nick Baum: I mean, marginal costswere significant. I mean, we were, I mean, it was, it didn't take a lot tooperate GiftRocket, so it was, it was pretty close to being all revenue thatcould be paired out dish shareholders.

Nick Baum: So it was wait. It wasa very great income for this period. Where founders were able to do differentthings take different stabs at different businesses.

Mike Townsend: Yeah. And what, whatwas the, what was it exactly? So you you're ISSU, were you issuing gift cards?Like how are you guys making money?  

Nick Baum: Yes. So it was the abilityto suggest a business to a friend. It was like paperless post. Imagine youcould take paperless post and stick a $50 bill in it and say, here you go toyour friend, deliver it by email with a suggestion of, Hey. I thought of thisplace, you're really gonna like this local restaurant. And so the car itselfwould include the listing of the restaurant or whatever local business to tryfor the recipient.

Nick Baum: And the recipient getsa choice of how they wanna redeem the money. I think back in the day, it wasjust PayPal and ACH transfer. So they choose whether they wanted to put intheir bank account and routing number or ticket to PayPal, and then they couldgo to the business if they wanted, but they didn't have to.

Nick Baum: So that was the goalof really trying to embody that sentiment of thought of you thought of thisbusiness. You're really gonna like this place without actually tying the fundsto the business. Some people loved the idea. Some people weren't, you know,crazy about it they're overall. It was generally positive, but ultimately forthe business itself, what mattered was we found a way to acquire users.

Nick Baum: Basically peoplesearching for ways to gift online.  

Mike Townsend: Interesting.

Mike Townsend: And so for those eightyears, from 2010 to 18, the other guys started working on other things. Did youfeel that it was important to keep the company, keep the team. Or was everyonekind like just burnt out from working together or working on this idea?

Mike Townsend: Like how, how werethose those years?  

Nick Baum: So it varied. So I hadtwo co-founders and we had kept the team really small at GiftRocket. It wasjust the three of us for about two years. And then we brought on one person tomanage operations and that person continued to run GiftRocket while it was inmaintenance.

Nick Baum: So two of the foundersme and me and my friend Coppel who is actually one of the co-founders ofTremendous too. He's he's still working on the business with me. We started areal estate tech company and we actually worked basically as real estate agentsfor a period of about a year, trying to find a scalable solution for sellinghouses in the bay area, we worked with these kind of monster Yeah, real estatecompanies that had bought up a ton of homes in the downturn and started rentingthem, but then wanted a way to sell them.

Nick Baum: Now that the markethad heated back up again, and we raised our hands and said, you know what,we're your guys for that? Do we have a lot of real real estate experience? Nonevirtually none, but we'll go out there. We'll do this for you. We're gonna finda way maybe to auction these properties online. And Coppel actually got hisreal estate license.

Nick Baum: As an agent he found abroker to put him under their license. And we went around, put up signs, filledout, lead disclosures, all that fun stuff, and ended up selling 10 houses inthe bay area. And we cashed a few checks for a few thousand dollars andrealized, Hey, this is just too much work for us to be doing.

Nick Baum: And we didn't have ascalable solution for how we were gonna. Dozens or hundreds or thousands ofthese homes at this time. So, I mean, there were a number of other real estatetech companies that got started around that time that had very interestingtakes on the market, you know, compass open door. We thought we were gonnastart something that was involved with the disposition of you know, maybe onan, in an auction format.

Nick Baum: And we couldn't quitefind a way to make it scalable. So that's what couple, and I. And then ourthird co-founder decided that he wanted to go into BC  

Mike Townsend: Is, is, does theauction not work because of regulatory reasons or just psychological reasons onor practical reasons on needing to see the house, or...?  

Nick Baum: It depends who thebuyer is. So auctions are great when you have investors and they're, they havea portfolio of different houses, different properties, because they're buyingso many of them that it doesn't matter. You know, the toilet's broken thatthere are issues with the foundations that can, that can be amortized acrossthe cost of all of these different properties that you're purchasing.

Nick Baum: But we were actuallytrying to sell from investors to individuals who would be living in the houseand just the level of education that's necessary to bring those types ofconsumers up to speed, as far as the process, it it's too great. And of courseyou start talking about. Everyone use a broker just to, to walk you throughthat process, to make you feel confident in the price that you're purchasingthe home at, and that didn't exist for the vast majority of the buyers forthese properties where they would be able to go out and feel comfortable, havethat level of comfort, submitting bids on these proper properties.

Nick Baum: So we never actuallygot around to auctioning them off. We did it, the old fashioning fashioned way,soliciting bids. And we were able to sell, I think, 10 out of the 12 holds welisted.  

Mike Townsend: Interesting.Interesting.  

Mike Townsend: And do you, are youbullish or bearish on technology in real estate now? I guess more specifically,like, like maybe there's specific areas of real estate, like you know, I thinkcrypto plays an interesting role where you could allow like fractional ownershipof houses.

Mike Townsend: Maybe auctioningdoesn't work, but maybe it works in some cases. Are there, yeah, from havinggone down that road, do you have. Thoughts on where, where, where, where isworth investing more versus not?

Nick Baum: I do, I did have one,you know, there was one idea I was really interested in that we didn't end uppursuing, but around title insurance. And are you familiar with the titleprocess? Have you purchased a home?  

Mike Townsend: I have, and I actuallyinterviewed a guy who was, who built title insurance, like a title insurancecompany. But go ahead.

Nick Baum: Yeah. Yeah. So what Ialways found to be super interesting was was that process that there was nokind of, you know, no ledger of who actually owns this home and it'sdefinitively this person and you have to actually ensure. that ownership rightto the house. Right? You have someone that's actually gonna go through all ofthe historical records, figuring out how did the home get transferred from oneparty to another, through these various contracts.

Nick Baum: And that's verylaborious and it's expensive. It costs thousands of dollars and you need anindividual manually to do that. And a lot of the cost is that manual work. So Ialways. Why isn't there some type of AI that's managing that some NLP toprocess the language, to handle almost most of the cases that aren't tricky.

Nick Baum: I'm sure there's somecontracts that are worded in an overly complicated way where you need someoneto go in there manually to figure it out. But perhaps for the vast majority ofcontracts, you don't need to do that. So I was always intrigued by that.otherwise real estate. It's a complicated, decent, there's so many perverseincentives in that industry where there've been, there's so many skeletons offolks.

Nick Baum: Who've tried to startcompanies that are gonna bring down the cost. Of agencies, for example, andvirtually none of them have had that much traction. So I think a lot of folkscome with that angle of let me upend what exists in the real estate market.Instead of trying to look at some of the smaller components that are still big,cuz real estate is such a huge industry.

Nick Baum: It's trying to think,Hey, within this system, how can I provide a better experience? And I thinkcompass for example, did a really great job of that. They said, Hey, let's workwith brokers let's or excuse me, agents. And let's buy the best brokerages.Let's figure out a way to give these agents really great software to create thisbrand that they want to work with and work for.

Nick Baum: And so I like theirtake on the market where we're at, instead of trying to battle the industry,instead of trying to disrupt what's already. You figure out, Hey, how can Iactually just improve what's working within this existing system.

Mike Townsend: Interesting. Yeah. Andtheir basic approach is create a brand and homogenous experience.

Mike Townsend: So, you know, compassis compass everywhere. It's like Starbucks, didn't really reinvent the coffeeshop experience. They more or less just standardized it. And that that'sright.  

Nick Baum: And it has an, it hasa brand that at least our generation feels more modern. It's more kind ofconsumer brand compared to you look at, you know, Coldwell banker and that atleast in my eyes doesn't feel like I don't recognize me in that brand and Ithink that's probably true for a lot of folks in our generation.  

Mike Townsend: Yeah. I very muchagree. So then you you, you feel like you have some success on real estate, butthere's no opportunity to scale it. Jumping back to the gift card world. Whatcaught your eye again? Like how did you realize this is an area you wanted toinvest more time into?

Nick Baum: Sure. So. We just sawthe businesses that were using GiftRocket. And it became clear that we had theopportunity to one, build something that really met their needs. And two, thefact that they were using GiftRocket was just a clear sign that there's amarket need for this. And my motivations as a founder really are based in, canI deliver value to other people, to companies that gives me a lot of personalenjoyment.

Nick Baum: I love the process ofbuilding product, engaging with customers. You know, at first I was alwayshesitant to do. Quote, unquote sales until I realized that's again, justtalking to your customers. And I, you know, we shied away from that for way toolong. We, we, at some point were the number one result on Google for gift cardAPI.

Nick Baum: I think that was maybe2011. And we had a number of companies that would come to us and say we we'dlove to integrate with your API and we'd go to them and say, you know what?You're not able to order an Amazon card through our API. That's not what we do.And we sent them away rather than following the scent, which would've been,Hey, there's actual real market need here.

Nick Baum: The fact that we arethe number one listing is really great evidence that no one else is pursuingthis market. In a way that's easily accessible to the large number of potentialcustomers here. And so I wish I could go back in time and kind of kick myselfon the butt and say, Hey, you know, listen, listen to your customers a littlebit more engage and and follow that scent.

Nick Baum: so fast forward many,many years, and we still had these businesses coming to us. We had built somesuper, super basic tools for them. Basically they could upload, not even uploada spreadsheet to send out gifts to recipients. They would email in a CSV to theperson working support and operations at the company.

Nick Baum: Then this person wouldgo into the command line, parse this file. and then out would go, whatever itis, 100 gifts to the soul cycle employee base for, for some department andthese were, it was so janky. It, it made no sense. And yet these companiescontinued to come to us. We had, we had dozens of them and at some point itjust became undeniable that, Hey, if they're willing to use.

Nick Baum: Let's actually buildsomething that's gonna be able to help them send thousands upon thousands,millions of dollars a year to these recipients. And as we dug deeper, we reallyfound out how actually challenging this problem is. And you would think thatthen in 2018 and now in 2022, it would be incredibly easy for a company to beable to just pay someone 50 bucks.

Nick Baum: It should be as simpleas being on the street, pulling out your wallet. Giving someone, some cashshould be even easier electronically, but really that's not the case. Most ofthe tools that have been built for paying recipients from companies are focusedon, for example, like recurring payments require registration.

Nick Baum: And when you'remanaging a huge, huge volume of recipients, as many of these companies too, ifyou're running an, in a global marketing campaign, or if you're conducting userresearch across the world, you're Spotify and you've got users. Literallyeverywhere. What do you give to someone in Sweden? What do you give to someonein the us?

Nick Baum: What if they'reunbanked, they're all of these challenging questions where you need onesolution to that. You can't just be piecing this together, recipient byrecipient. So we found that the problem was much, much deeper and harder thanwe thought it was initially.  

Mike Townsend: So what's the answer.Do you say we wanna build. Like maybe catch us up to where, where you guys areat today. So now it's come to us and give us a bunch of emails and we'll enterthe allocation amount, pay us, and then we'll take a fee and send out an emailwith gift cards on it, to their choice or Amazon or, or like, yeah. Where did,where did you go from there?

Nick Baum: Yeah. So let me justgive you the, the, the 10,000 foot pitch here, which is Tremendous is a payoutplatform, enabling businesses to pay people with money, gift cards, prepaidcards, and they can even donate money to charity. So this send, send moneyworldwide to individuals and they'll be able to choose what makes most sensefor them.

Nick Baum: So it required doingtwo things. Initially one is provide more options to recipients. I think we hadjust maybe ACH and PayPal. We added gift cards. Gift cards are really great. Asa payment option for small denominations, we added prepaid card. VisaMasterCard, we added charity donations so that companies could send somethingthat was kind of in line with their brand and missions on the social side.

Nick Baum: And then excuse metoo, is we built a dashboard for these companies to track and manage thiscomplex process because if you're sending it to maybe a few dozen people, it'ssimple use, use a spreadsheet, but if you're sending to thousands and thousandsof people in a given. You need something that's much more full feature.

Nick Baum: You need to be able tosearch by recipient email, maybe participant IDs. You need to be able to resendvery easily through the dashboard. You need to track, for example you know,maybe collect tax information for recipients if they receive more than $600. Sowe ended up building a ton of tools for many different use cases that are allbased around the common idea of.

Nick Baum: People on a really aone off basis. So one off payouts is really where Tremendous specializes andthe actual user flow is typically a recipient gets an email that will bebranded, you know, from this company or, you know, through Tremendous, but itcan go through the, the sender's email server too, goes to the recipient, said,here's your message.

Nick Baum: Click to redeem yourmoney, click through. And then there's a page that shows them all of the. Thatthey can choose from and the company can choose which options they want topresent to a recipient. So it can be, again, gift cards, visa cards, PayPal,ACH, Venmo, charity donations. And for some companies they'll say, let me justturn everything on.

Nick Baum: For some companies,they might be a health and wellness program. They might say we're gonna removethe Applebee's in Buffalo, wild wings. Let's pair that down. And then therecipient chooses what they. And that's it super simple. They don't have toregister. They don't have to necessarily provide bank account information.

Nick Baum: They don't need tosign up for, for payroll, anything like that. So we've just dumbed the processdown. So it's incredibly simple for both the sender and recipient. And if youcompare that to alternatives that existed well, companies were, you know,Frankensteining different solutions where it's like, start out, Hey, maybe wewanna use PayPal.

Nick Baum: Right? PayPal is goodcoverage. Well, it's good coverage, but it's not 100%. And when you're runninga very large campaign, you need 100% coverage. Cuz every person you don't havea payout option for that. Isn't their preferred choice. That's actually asupport ticket. And then you're gonna need to go. You're gonna need to find anAmazon card or if they don't have Amazon, you need to find a target card.

Nick Baum: Or if they'reinternational, you might need to find an international prepaid. So it becomesthis almost combinatorially complex project, as you have more recipients andmore places with more payment preferences, and then we're not even talkingabout different currencies that you have to deal with. So we manage all of thecurrency, trans conversions, language translation, and all of that fun stuff.

Mike Townsend: Yeah. Interesting. SoI have a question for you. So as I think about this, I'm kind of thinking aboutthe there's, there's a bunch of things that companies do predict. You know,when they hire people, they go through, there's a lot of commonalities fromlike, I gotta source person. I gotta interview 'em I gotta bring 'em on.

Mike Townsend: I gotta pay 'em Igotta manage 'em I gotta bring the culture. I have to have a process, likeprocess I'm process. Like the vast majority of things that a company does isalso the same things that many, many other companies do. So it's like the areawhere you are really innovative and unique and creative is a, is a very smallsliver of the.

Mike Townsend: Things that thecompany does when you look at like tasks that people do. And I think about thisas like, this is one thing that many companies do they have, maybe, like yousaid, a survey, a reward for a survey, customer appreciation day employee bonusor something that they wanna send out. I'm sure there's like, You know, the 8020 rule where there's, there's probably five or six use cases that applies tomany different companies.

Mike Townsend: And then somecompanies do random things, but they're still companies are still sending moneyout. That's the problem that they have to, to, to people and, and. When I thinkabout 'em like, that's, that's probably a big opportunity for someone to specificallysolve that because PayPal and Stripe and like Amazon, they can't ever solve it.

Mike Townsend: Like you said, ahundred percent. So if you, if you almost picture like a map of all the thingsthat companies do, then you start to see, then you start to. Startups solvethose problems. And sometimes there's, there's like from your problem to thenext problem, there's a pretty obvious jump. Like if I'm helping, you know, I'mbuilding like a CRM for companies to hire people.

Mike Townsend: Well, maybe it's likethe, the product roadmap is pretty straightforward. I can let them interviewpeople. I can let them manage people. You can kind of grow out from. Then, thenI kind of see like almost in this case and tell me if you disagree, but maybeit's an advantage that Tremendous didn't raise VC because now you can build avery profitable business and maybe get to, you know, I don't know, tens ofmillions in revenue, a hundred people, and it could be wildly success for EVfor everyone involved.

Mike Townsend: If you completely ownthat niche for like, I'm thinking about what makes, what makes VC businesses.Gain an advantage on a problem versus self-funded businesses gain an advantagebecause you have an advantage in that you don't have to turn into a billiondollar company. Like when you go through YC expectation is, Hey, we, who do wepraise Airbnb Stripe, like biggest valuations.

Mike Townsend: So there's thatimplicit and obvious, explicit expectation. Do you feel that same way? I mean,do you think. Like business direction in, in this turn, in this way, or I'mcurious.  

Nick Baum: I think it's a veryinteresting insight and I think it's true, which is if you are not VC funded,you have more flexibility around what outcomes you have with the business.

Nick Baum: So you have moreflexibility around what markets you target. Mm-hmm because you're not gonnabuild, you know, a trillion dollar business building software for laundry mats,for example. Right. And. In this case, we're running the business like a growthbusiness stuff. We're VC free. But we're not anti VC.

Nick Baum: We think raising moneycertainly certainly is incredibly valuable in many circumstances. And for us,we haven't raised money for the reason that we don't, we haven't needed to.Yeah, it's not that we've identified a market where we think it puts us at adisadvantage. Or that we wouldn't be able to re have an outcome that we wanted.

Nick Baum: It's simply that we'vebeen, we were fortunate to have the revenue stream coming from the consumerbusiness that started to funds the corporate business, and that continued togrow. And we just couldn't grow faster than the rate that we were growing. And.we're finally at the point where we're kind of above our skews, where we're ateam of 50 now, but we were much smaller for many years.

Nick Baum: And it was very hardto keep pace with the traction that we had based on the infrastructure that wehad at the same time. So we're now kind of at the place where we've got productmarket fit and we're pushing real the stick on, on go to market and trying toaccelerate things significantly. We think this is enormous market the B2Cdisbursement and payment space.

Nick Baum: So, so would youraise? We would, yeah. Yeah, we absolutely would. We have to have a slightlyhigher conviction than your average company to raise money because you'rebringing on new partners. You need to make sure all of your expectations alignand things change. They really do change. When you have investors.

Nick Baum: So we'd need higherconviction to raise money. But look, if we find a campaign that requires, youknow, 50 million to spend tomorrow, we're certainly open to it. But you know,first the most important thing is that we maintain the priorities that we, asthe entire company, founders, employees think are the most important onesbecause Okay.

Nick Baum: Raising moneysometimes. This is one of my favorite expressions can make you do Unnaunnatural acts. And we would just wanna make sure that we were never in aposition where we felt that we might be doing something that wasn't in linewith the priorities of all the folks that are working at the company right now.

Nick Baum: So I, I think youbring on the right partners and that's not a risk. But you just have to have avery high bar. And I think we're in a very, very fortunate position. We're notlooking six months out, 12 months out. We need to raise to get theprofitability, for example, we're there. So it's just a question of, do wethink we can grow even faster by raising money?

Mike Townsend: Well, the answer tothat is, is yes. You certainly can grow faster by raising the question. Is, isit a, is it a trade off that founders, you know, effectively decision makerswanna. For your, your life. Like, like I find it really interestingconversation. One that probably doesn't happen enough. I raised too much moneyin a, in a past business.

Mike Townsend: We raised 25 million.We had about, I don't know, a hundred K revenue at the time, big market size.We were building a marketplace. Marketplaces are high valuation to revenueratio because if you capture the market, it, you know, orders a magnitude morevaluable mm-hmm than say, like SAS or something. So. In hindsight, I think itwas a a mistake because of the trade offs on the, on like the, the doubles andtriples that we could have hit.

Mike Townsend: Like there were nooptions for single double triples. It was like find a, you know, billion plusdollar opportunity in the next three to five years. Otherwise shut the businessdown, work up something else that does. And it was a kind of like layeredstress and, and it was like a layered. Optics. It was like, it was like tryingto walk with, with binoculars on like we're looking we're, we're like trying tofind all the biggest opportunities we could possibly solve.

Mike Townsend: And then there's allthis, you know, it's like not worth your time to pick up a hundred dollars billon the ground because you need to find, you know, a, a, a billion dollar bill.And it was like, it was a strange kind of almost, it felt almost unnatural.Like, you know, VC is relatively new in the, in the scheme.

Mike Townsend: People startingcollective organizations. And I'm always fascinated by people's mental modelsfor making the decisions, especially when you don't need to, especially whenyou're running a profitable business, because it's like, yeah, you, youprobably could create a story, make a deck, go out, raise 10 plus million, andnow you have more cash to burn.

Mike Townsend: And it's all aboutexperiments, right? It's like your R and D budget now goes. I don't know, 50 Ka month to maybe 500 K a month. And you say let's, maybe there's a market here.Let's throw some people on it. Let's experiment. It's like, that's, that's kindof how I think of the implications of, of VC when you're running a profitablebusiness is like new product line iteration, R and D becomes a much bigger partof the, the scope of the business.

Mike Townsend: You're kinda likeswinging for things. But I'm curious if you have any reactions to that. If thatmakes sense on your side.  

Nick Baum: I, I think you'reright. I think if you are expanding your product line, going into new areas,gonna run a lot of experiments, you need that capital. You need that capital tobe able to, you know, make those swings, see what connects.

Nick Baum: And I think we're in aposition where we're so hyper focused and this. Itself. And we we're suchbelievers in the payout space and the opportunity here that we don't have aninterest in at least the short term taking those other swings. Yeah. For us,it's really about building the go to market function, bringing on the, thepeople who are gonna help execute the strategy over the course of the next 12months or so.

Nick Baum: So honestly, ifsomeone wrote us rose the check for $50 million, we'd have a sick offsite. We'dhave a really sick offsite, but I don't know how we would deploy that money atat least in any effective way. At this point, w we're in a position as abusiness where our challenges are more about growing the organization andgetting the right people in the right seats.

Nick Baum: And that's not aproblem that money very easily solves. So, you know, I do think you're right.Yeah. If you raise money, you're definitely much more likely to grow faster,but at least in our circumstances and I've even talked to VCs about this. SomeVCs have said like, yeah, given where you're at, like, I'm not quite sure whyyou would want to raise, you know, a ton of primary dollars here.

Nick Baum: Mm-hmm so yeah, I, Ithink for the vast majority of businesses, That are VC backed. I think your,your point makes a ton of sense, which is, yeah, you've gotta find thatopportunity and you don't, you can't have that patience to just sit on somemarket to unfold. You can't just wait for that billion dollar.

Nick Baum: opportunity to appear.You have to, you have to go and find it. Yeah. And you know, for us, we've beenlucky enough to stay focused on this problem for, for a long period of timenow. And you know, this, this approach has worked for us, but it's definitely notright for, for probably the majority of of startups.

Mike Townsend: Do you think timing isyou guys hit timing on the nose here, like 2018 and 2022. Is this somehow ahigh growth area for companies sending out payments, like are people and maybemention what are the, what are like the top couple of use cases, surveys. If acompany wants to do customer surveys, learn about their customer base, they pay'em 20 or $50 gift card.

Mike Townsend: What are the othertype of things people use it for companies use for?  

Nick Baum: So I, I think wemissed out on at least several years that would've been really great for us tobe in this market, but I think. Gotten plenty of good years under our belt. Andso let me give you a few examples, and this is it's the examples that reallyhelp explain what is Tremendous.

Nick Baum: Why, why are peoplesending gift cards and visa prepaid cards? Why would anyone do that? Why isthat relevant? And so let me give you the example of, for example Spotify,Spotify runs market user research campaigns. Across the entire world. They'vegot a team of researchers in the us, they're in Sweden.

Nick Baum: They're in otherlocations, of course they have users everywhere. And so people will takesurveys online. They will do sometimes, you know, I don't know, since thepandemic began, but do live studies as well. And there needs to be a way totrack and manage that process across a tire team, no less of distributingincentives to people who might not share the same.

Nick Baum: Don't share the samecurrency. You don't know what products they want and it becomes really a hairon fire problem. When you have your research. Trying to figure out how to solvepayments, just to give someone 75 bucks for spending a half hour of their timeexplaining how they use Spotify. And so that's, that's one case marketingincentives are big too.

Nick Baum: So we've worked withprograms like for example, Google fiber, where if you refer a, a friend oranother business to use Google fiber, you'll be entitled to, I forget what theamount is, you know, a hundred dollars. That you'll receive from through Tremendous.And so how else is Google gonna execute that?

Nick Baum: They're gonna maintaina sheet of all of these referrals. Maybe they use PayPal, but then who doesn'thave PayPal does. And that's the problem that you encounter then there'semployee recognition. it doesn't really work to run that through payroll. Ifyou have all of these different managers, just trying to send their directreports, maybe, you know, a hundred, 200 bucks at the end of the year, that'skind of a nightmare process to engage with HR about that, to do it throughpayroll.

Nick Baum: And instead you justwant them to be able to say, here are a few email addresses. Mm-hmm, send thema hundred bucks each and let them choose what they. And of course that has amuch nicer display too, for the recipients, with Brandon, with a logo, with amessage, all of that, sending something through payroll doesn't quite have thatsame impact.

Nick Baum: Yeah. So those arethree big ones, but we've, we've done a ton of stuff. We we've worked with governmentsthat are trying to incentivize their constituents to get vaccinated. We'veworked with a furniture company that needs a way to issue refund. Because theirproduct is sold through a third party marketplace.

Nick Baum: They're selling itthrough Walmart. So they don't have the credit card details to refund thepurchaser if there's a manufacturing defect. So they'll use Tremendous to sendthem a hundred bucks. Interesting. Yeah, we've worked with thanks that aregiving rebates on closing costs. . Yeah, so it is all over the map.

Nick Baum: Yeah. Companies paypeople for all sorts of things. Yeah. That aren't related to the work andservices that they perform.  

Mike Townsend: Yeah. And what's thetotal market size in your estimation?

Nick Baum: So within the us B2Cdisbursements is 10 trillion per year. now some of that's relevant. Some ofthat's not mm-hmm . If you look at just rewards and incentives.

Nick Baum: So that would be, forexample, survey incentives, marketing incentives, employee recognition. That'ssomewhere between 102 billion, two, sorry, a hundred and $200 billion per yearin the us. so the bottom floor here is really around several hundred billion inspend per year, but more likely in the trillions annually.

Mike Townsend: Wow. And why do youthink this hadn't been, or, or is it a crowded space? Like why had it not beenpursued heavily even with VC? I mean really any market size over like 3billion, 4 billion really deserves. And can warrant VC funding and smart peopleworking on this. Was it a crowded space when you entered?

Mike Townsend: I imagine there'sother players that are doing, doing a similar thing now.

Nick Baum: I think companies havepacked together solutions that have kind of worked. Yeah. And so they've usedPayPal or if you're the CMO of a company and you're trying to figure out whatdigital rewards are we gonna use for incentive?

Nick Baum: You think, yeah.Let's, let's go and use Amazon. That's pretty easy. Mm-hmm but it starts tofail at a certain scale. Yeah. Yeah. And so I think a lot of companies havetaken approach to payouts. That's not right. And, and not focused on one offpayouts. And it's hard to identify this, this opportunity because when I startthrowing out well, There are governments incentivizing their constituents toget vaccinated.

Nick Baum: You've got employeerecognition, you've got paying people for survey incentives. Those things don'tnaturally click, right? That's not obvious. And only when you dig deep and youunderstand kind of what that underlying issue is. The problem that they'resolving does become clear. It's one off payouts. And so I don't think anyonegoes into payments.

Nick Baum: Who's not superexperienced thinking, Hey, yeah, that's a problem I wanna solve. If you look atcompanies that have done pay. PayPal got their Stripe payouts. They're reallyfocused on a recurring solution. So for example, marketplaces, now that's atough game and there are a number of skeletons in that, in, in, in that in thatwar field.

Nick Baum: And nothing reallyworked out super, super well there because there are just so few players thathave really large volumes and the margins are very, very. So it's one offpayouts. That's really an attractive marketplace or sorry, market in ouropinion. And I think a number of companies have tiptoed around it.

Nick Baum: There are companiesthat are focused on rewards and incentives just focused on maybe employeegifting. There are companies like Sendo, so that are focused on marketingincentives. How do you engage your prospects? How do you get them to sign upfor a meeting? But none of these companies have focused on what is the coreunderlying problem.

Nick Baum: Damn it. How do youjust give someone 50 bucks? Mm-hmm so that's what we're trying to solve. That'swhat we've identified as, as the key problem across all of these spaces.  

Mike Townsend: How, how biginfluences sorry to cut you off. How big influences crypto? I would imaginethat people would rather many people statistically would rather get.

Mike Townsend: $50 in Bitcoin or yourSTC, then a $50 gift card. Like it just, it just has more utility to it. It's,it's more expensive to get like you know, gift cards. Are they just, they haveattributes that make them less attractive than money and certainly lessattractive than crypto in some ways. Is, is that on the radar? Is that aninfluential part of how you think about growing the business orinsignificant?  

Nick Baum: We respond to customerrecipient demand and it just hasn't been there. Okay. Most of these folks wantsomething that they can spend very easily. So for example, if you take a lookat people who are responding to surveys online, they just want to toss that 50bucks in their Amazon account and, you know, purchase, you know, some towels orwhat, whatever it is, they just want something that they can use, or they wantmoney to their bank account to spend.

Nick Baum: However, they. But ifit can't get to Fiat, if it can't be spent very, very easily, I think there's ahuge disincentive to choose that option we've dabbled with, with crypto, triedto see what the demand is. It's a very tiny sliver of people who want to who, whowant to choose it because especially when you're dealing with like, 50 buckstranslating that to crypto.

Nick Baum: If you've never usedcrypto before, that's not a sizeable amount where you're like, that's where my,my investment in this space is gonna start. And if you do have a cryptoinvestment, it's much larger. You're probably not thinking, oh, how am I gonnatransfer that this $50 into that, that other location on Coinbase or, or FTX orwhatever it is.

Nick Baum: So. , we're notagainst it. We're open to it. We've added many, many options because it becomesmore prevalent amongst consumers. And I think as adoption continues toincrease, then yes, I, I do expect at some point we'll probably offer crypto.But I don't foresee that being in the next year. Yeah.

Mike Townsend: Next five?

Nick Baum: Maybe towards the endof that. Yeah.  

Mike Townsend: Yeah, I think it'll bewhat influences that inflation, you know, as people desire to hold U S D lessbecause of inflation, then alternatives become more desirable, relatively,probably crypto companies, as there's more VC backed, large successful cryptocompanies. They're probably gonna wanna send maybe they do it themselves.

Mike Townsend: Probably not. I mean,if, if the pattern continues that companies need a hundred. Integration thenthey're probably just gonna partner with somebody like you guys. But I thinkcrypto companies sending worldwide crypto companies usually are prettyinternational. So I would imagine companies who are international desire tohave it managed by a centralized platform, more than doing it themselvesbecause people have different payment preferences all over the place.

Mike Townsend: It's interesting. Anyother things that are like dynamic or exciting to you in the market or thingsyou've learned about. Either in payments or gift cards or anything else morebroadly,  

Nick Baum: I mean, gift cards isit's an unusual space. It is. And it's very unusual and it's, it's hard tobelieve the numbers.

Nick Baum: Yeah. When we had noidea when we got into this space, what the market looks like at all, and thereare different segment there's consumer there's corporate there's. You know, thesecondary markets, which are a whole another story.  

Mike Townsend: That's crazy. That'swhere we played in. So we were like, we would do Bitcoin to give secondhandgift card trading.

Mike Townsend: So as an on-ramp topeople to get into Bitcoin, you'd like buy gift card traded online. That's awhole crazy world.  

Nick Baum: Yeah. What are some ofthe, the any shady characters that you encountered in that world?  

Mike Townsend: Oh, for sure. Yeah. Imean, it is just by nature of the attributes of the money. It attracts peopleto either. You never know, like you never know someone's actual incentives. Youcan only speculate by like what they're saying or just intuition or wherethey're located or time of like, but you, I never know. Like I, I have. It'scomplete speculation, but like a lot of it goes through Nigeria. A lot of itgoes through China.

Mike Townsend: A lot of it is liketraded through multiple middle men and it's like, well, why do you needmultiple middle men to do that? And there's always some story, but it's, it'slike, why, why do you, why take a 30% discount on this gift card? Like, was itstolen? Like, were you likes a whole bunch of question marks that are kind ofstressful?

Nick Baum: Yeah, I I've, I'vechatted with a few folks. Who've worked in the space of secondary markets andyeah, at least one of them basically. I, I would never, I would never touchthat again. That was that was some scary. And you know, I don't, I don't knowthe details, but yeah, there are a lot of those questions where you have tosay, why are you going through the hassle and getting less money out the otherend than kind of these other alternatives that, that seem like a betterapproach.

Nick Baum: And yeah, we've, youknow, we've been focused, we've done consumer, we've done corporate, we've donethose angles and those are also, you know, weird and intriguing in differentways. And the volumes at play. You know, it's the hundreds of billions ofdollars for gift cards. It's, it's such a boon for these businesses that theyjust they're a it's advertised everywhere.

Nick Baum: And you know, it is anadvantage for consumers in, in some, some cases. You've got, you know, some,some perverse incentives in some places, but overall I think it is a good toolfor consumers.  

Mike Townsend: What's an advantagefor a consumer. would you say?

Nick Baum: Well, for example B2Cpayouts again, where if you just want to give a companies to give someone 10bucks, cuz they said, if you referred your friend, we're gonna give you thisincentive.

Nick Baum: they don't need tohave a PayPal account. Okay. Yeah. Amazon basically as good as cash. Yeah.Yeah. You know, to the top retailers, I think that's they're close to being asgood as cash without requiring registration or bank, account details, anythinglike that.  

Mike Townsend: And what's a slippagewhat's like average slippage numbers for if a company sends out a thousand giftcards, how many of 'em actually get redeemed do you think?

Nick Baum: Through like, throughTremendous, for example, Or just generally, like what, what Amazon, like howmany, what percent of a rocket does Jeff Bezos's correspond? Yeah.  

Mike Townsend: Yeah. Well, I guessyou probably know Tremendous more in detail, but I would imagine they're aboutthe same.  

Nick Baum: Yeah, I don't know. Imean, it's, it's typically less than 10%. I mean, it depends on the use case,but I mean, we have clients where that number's, you know, virtually zero,virtually zero. And then others where it's higher, but it just depends so muchon the denomination mm-hmm and the use case itself that it's hard to projectfor any individual company. What that might look like if you're talking aboutlike retailers, like like Amazon or target.

Nick Baum: You know, I've heardthose numbers are somewhere in the six to 10% range, but my guess is forsmaller retailers, it can get much higher.

Mike Townsend: Yeah. Yeah. That wholeworld as wild, like Blackhawk the network that issues the car, it's like, it'sa pretty centralized industry. And that if you're, I don't know if Amazon, Ithink Amazon does their own actually, but if you're for most.

Mike Townsend: Merchants, they'reusing a service black, black Hawk. And there's another one. Forget the name ofincome. That's right. And they, they issue. They keep track. They integratewith all the point of sale systems that all the stores like if you steal giftcards from the CVS, they're not worth anything cause they haven't beenactivated.

Mike Townsend: So there's a wholecentralized database I've thought about. Could you move gift cards on chain andhave the activation integration with the point of sale? Be it on chain.Tokenized like cryptographic on chain event. So you can say, okay, this cardwas just activated. It's on chain. It's not in a centralized database.

Mike Townsend: My, my basicconclusion, curious if you have any reaction, is that it's just, it's soentrenched. That it's, it would be difficult. I don't know. I, I still, I, Istill think it's possible, but I think it's super, super hard.  

Nick Baum: Yeah. I guess myfeedback there is, you know, who the central authority should be in thesecases.

Nick Baum: So for example, ifthis is an Applebee's card, Applebee's are some partner, there should be theauthority on ledger who owns these funds. I don't think added going off chain.You don't need trust between unknown parties mm-hmm for, for this product, I thinkit's fine to have one central authority, especially because you're buying it toone particular retailer and you know, you're, you're entrusting them in manydifferent ways by just buying a gift card to, to that entity in the firstplace.

Mike Townsend: Cool man. Anyparticular people, books places that you've learned a lot from over theyears.  

Nick Baum: Beautiful places,books. Well, it started with YC. Yeah, like learned a ton. I remember what'sfunny is got exposed to Paul Graham in his writing. I think maybe four, fouryears before we did Y Combinator, I had an internship at Bridgewater, the, thehedge fund in Connecticut, which if you want to talk about culture, that's,that's a whole nother story.

Nick Baum: And I mean, it wasn'tpeople know about Bridgewater back then and you know, all the principles andstuff has been, have been popularized since. Yeah. But before arriving inWestport, Connecticut, that summer I received package in the. It was hackersand painters Paul Graham's essays. And I remember that being very influentialabout how I thought about technology, startups, business programming I thoughtit was really, really incredible.

Nick Baum: And of course gettingthe opportunity to get his feedback on our business. This was when Paul Grahamwas actually. an active partner. NY Combinator was, was really, really cool.Just seeing the way his mind operated. Eventually you get a point, get to a pointwith your business where it's very, very tough for any partner despite how manystartups they've seen.

Nick Baum: To give you mm-hmm,really strong, actionable advice about the, what become niche problems for yourbusiness that require so much domain expertise. So the feedback that we gotfrom YC early on was really, really Tremendous, especially because I was comingfrom a background in finance. My co-founders hadn't started a business before.

Nick Baum: So working with thosepeople who had gone through the process of getting a product off the ground,talking to. Yeah, investors talking to the media, all of that stuff was really,really incredibly helpful and I'd recommend it to any early entrepreneur youknow, until you get to the point of having a ton of domain expertise and havingdifferent problems where you need a mentor in that space.

Nick Baum: Just start with whyCombinators you know, why Combinators essays. Yeah. And advice I think getsreally, really great. Yeah.  

Mike Townsend: Do you act, do youactively engage with a mentor at this point advisor, like outside the companyor not so much?  

Nick Baum: Not so much. I workwith an executive coach that's helpful.

Nick Baum: But not anyone withinthe industry. For example, I have, I have a number of peers that have beenreally helpful. I think just working with really smart friends. Yeah. Over theyears has been as valuable as anything. Right? They're the ones I, I foundedthe company with friends. They have the domain expertise.

Nick Baum: They're incrediblybright. They're they're unafraid to give, to give any type of feedback. I thinkthat's been the most instrument. In my own growth is being able to work withreally, really talented friends who are vested mm-hmm in the business and, youknow, hopefully care about me.  

Mike Townsend: Totally cool, man.

Mike Townsend: Well, congrats, Nickgot all the progress. Seems like a really fun business to grow and sounds likehas an awesome niche profitable, really exciting. Thanks for hopping on, man. Ireally appreciate your time.  

Nick Baum: Thank you. This wassuper fun.  

Mike Townsend: Cheers.